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Department of Finance Prof. Dr. Alexander F. Wagner

Sustainable Finance

My Public Discussion Note: Sustainable Finance in a Shifting World Order, lays out key issues of sustainable finance for a general audience.

Do investors care about biodiversity? The short answer is “Yes. Recently, investors have earned (and presumably expected) a “biodiversity footprint premium”, that is, higher returns from stocks with a more negative footprint.

If one wants to reduce portfolio carbon risk exposure, one may have to accept lower portfolio diversification. We show this here, and we also present evidence how mutual fund managers navigate this trade-off.

Sophisticated investors (mutual fund managers) with more skin in the game invest less in ESG. So, investors should be cautious in blindly accepting a business case for sustainability that sophisticated investors, on average, do not seem to believe.

Perhaps surprisingly, given all the concerns about green-washing, firms that talk more about the climate on conference calls do reduce carbon emissions more.

When Donald Trump was elected US President, surprisingly, climate-responsible stocks received a boost. Why? Long-term institutional investors expected a regulatory boomerang.